Mandatory Disclosure: Beware of Penalties!

Further to the March 26, 2015 budget, Bill 112, adopted February 8, 2017, implements the Finance Minister’s intention to extend the obligation to produce a disclosure form for tax credits that exceed $25,000.

This disclosure must be made if one of the following conditions is met:

Remuneration is conditional (this is the condition most likely to apply);

Taxpayers sign a confidentiality agreement;

Taxpayers receive contractual protection.

Deadline for filing the disclosure

In the case of refundable tax credits, the deadline is the same as the one granted to submit the prescribed form. For corporations, this corresponds to 18 months after year end. In other cases, when the transaction is realized after this deadline, it is extended to the transaction realization date.

Revenu Québec grants a 60-day period, up to April 9, to file missing returns. As for refundable credits, it’s not necessary to file a disclosure for fiscal years ended before January 1, 2014.

Penalty

The penalty is $10,000 plus $1,000 per day, as of the second day, up to a maximum of $100,000. Furthermore, the prescription period has been extended. At the symposium, La RS & DE et autres mesures incitatives à l’innovation, presented on February 23 and 24, 2017 by the Association de planification fiscale et financière, Revenu Québec specified that the penalty would not be automatic. However, given the amounts in question, better safe than sorry!

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Tax Bulletin – 2017 Federal Budget: Building a strong middle class

Federal Minister of Finance, Bill Morneau, presented his budget on March 22, 2017. The government is continuing with its planned focus on building a strong middle class through innovation, skills, partnership and fairness. Budget 2017 focuses on giving talented people the skills they need to drive our most successful industries and high-growth companies forward, while investing in Canadians’ well-being through a focus on mental health, home care and indigenous health care.

Forecasted deficits

As widely anticipated, the budget projects significant deficits over the next several years. The government forecasts a deficit of $23 billion for 2016–17 and $28.5 million in 2017–18. Over the next four years, deficits are expected to decline gradually from $27.4 billion in 2018–19 to $18.8 billion in 2021–22.

Canada continues to have the lowest total government net debt-to-GDP ratio of all G7 countries. The federal debt-to-GDP ratio is projected to decline gradually after 2018–19 reaching 30.9 percent in 2021–22.

Investing in priorities

The government is committed to making smart, necessary investments in the economy to ensure a thriving middle class, and remains committed to a responsible approach to fiscal management.

The government will initiate three new expenditure management initiatives:

A comprehensive review of at least three federal departments (to be determined), with the aim to eliminate poorly targeted and inefficient programs, wasteful spending and inefficient programs, and ineffective and obsolete government initiatives.

Initiate a three-year review of federal fixed assets to identify ways to enhance or generate greater value from government assets.

Initiate a review of all federal innovation and clean technology programs across all departments, as federal programs are dispersed to simplify programming and better align resources to improve the effectiveness of innovation programs.

The government will report on the progress of these reviews in Budget 2018.

The government will also introduce legislative changes to improve the organization and efficiency of government operations, as needed.

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U.S. Tax Development: Two-for-one Repeal

January 30, 2017 Executive Order

U.S. President Donald Trump’s January 30, 2017 Executive Order restricts the issuance of new U.S. federal agency regulations.

As a result, the Internal Revenue Service (hereafter the “IRS”) will not propose any new technical tax interpretations, other than the usual notices such as interest rate changes.

Under this new executive order, every time an executive department or agency would like to comment on or enact a new regulation, they must identify at least two prior regulations to be eliminated.

Regulations

These interpretations represent the opinion of the U.S. Department of the Treasury relating to the Internal Revenue Code (hereafter the “IRC”) and constitute a reference for interpreting the federal income tax legislation. The Treasury’s technical interpretations summarize application of the IRC by providing an official interpretation of the U.S. tax code by the Department of the Treasury. Often these interpretations are presented following requests for private letter rulings or at the Treasury’s initiative to clarify certain aspects of the law (revenue rulings).

Order objectives

According to the White House, the idea of compensating for new regulations by eliminating prior ones has the potential to provide a “regulatory balance” to the flow of new administrative formalities issued by the U.S. Government and help simplify or eliminate obsolete regulations.

Furthermore, according to the White House, the additional costs associated with the new regulations will be offset, to the extent permitted by law, by the elimination of existing costs associated with at least two prior regulations.

The impact of the order

According to President Donald Trump, businesses will find it easier to create and operate a business in the U.S., as they won’t be hampered by tax regulations.

However, opponents of the President, many of whom from the world of business and tax, would argue that this order could be detrimental to the sound administration of the tax system of the world’s leading economy, by creating or maintaining a vague regulatory framework around complex tax rules. Many also consider that these interpretations are needed for the government to function properly and for the sound management of the tax environment that U.S. businesses or companies doing business in the United States rely on.

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Intragroup Transactions – Avoid the GST-QST Traps

On-line Tax Strategies

Did you know that intragroup transactions are often incorrect and a common source of significant assessments by the tax authorities? Many of these frequent errors can easily be avoided. The following paragraphs provide information on areas to watch out for and potential solutions to limit the impact of commodity taxes on your cash resources in intragroup transactions.

Basic rules

Enterprises are required to collect and remit taxes on taxable supplies, even in the case of transactions between companies within the same group. The consideration paid or payable to an entity in exchange for a taxable supply triggers taxes, regardless of whether an invoice has been produced. Transactions may be evidenced by a contract, invoice or even a journal entry.